The Business Council of Australia and the Corporate Tax Association welcome the Budget announcements on international tax reform.
Reform to Australia’s international tax system is important to enable Australian businesses to remain competitive in a global environment.
The government’s response to the Board of Taxation’s report effectively addresses the majority of issues business had identified as barriers to growth for Australian companies. We believe that some specific measures, such as the proposed improvements to the tainted services rule, are not controversial and could be implemented earlier than the timeframe indicated.
The measures announced this week will go a long way to removing those impediments, and enable Australian companies to compete on a more equal footing with their international counterparts.
We commend the Board of Taxation for its report and the central role it has played in the consultation process. The board has facilitated an open and constructive process that has enabled business to make a positive contribution to the debate.
Specifically, we welcome the following major policy announcements:
- The reduction in compliance costs and the removal of impediments to the efficient structuring of offshore businesses.
- The CGT exemption for gains on the disposal of shares in CFCs with underlying active businesses.
- The reduction in the scope of the tainted services rule in a way that will encourage Australian businesses to set up offshore service centres.
- The extension of the exemption for repatriated profits.
We were disappointed that the government was not able to make a stronger commitment to measures that address the bias that exists against companies that conduct operations offshore. However, we understand external factors have restricted the policy options available to the government in this Budget.
Nevertheless, we note that the board did recommend a 20% shareholder credit in conjunction with dividend streaming. While the government has decided not to proceed with these measures at this time, it has not ruled out further consideration in the future.
This issue remains a major gap in Australia’s international tax policy framework and will need to be addressed to ensure we do not fall behind our economic peers. We will continue to pursue a positive outcome in relation to this issue.
This package of measures, when implemented, will provide a very welcome boost to the competitiveness of Australian companies competing in the global environment.